FINNISH GOVERNMENT APPROVES PHARMACEUTICAL

UNCLAS HELSINKI 000311

SIPDIS

E.O. 12958: N/A
TAGS: ETRD FI PREL
SUBJECT: FINNISH GOVERNMENT APPROVES PHARMACEUTICAL

REFERENCE PRICING SYSTEM


1. Summary: In a disappointing move and despite Embassy and
industry efforts, the Finnish cabinet voted unanimously June
25 to approve a reference pricing scheme for pharmaceuticals,
a provision of which undermines the value of patent
protection for medicines created and manufactured by U.S. and
other pharmaceutical companies. Parliament is expected to
approve the proposal at the end of the summer. Despite the
fact that the Ministry of Economy and Employment, the
Ministry of Foreign Affairs and the Chancellor of Justice
initially opposed the proposal and Prime Minister Vanhanen
was equivocal, in the end all acquiesced and supported the
Minister of Social Affairs and Health and the short-term
attraction of an estimated 50 million euros annually in
savings. Embassy will engage key parliamentary figures in
the next month to urge that the government develop a revised
proposal that achieves their stated objective of containing
health care costs but that will maintain the level of
intellectual property protection that pharmaceutical
companies have previously enjoyed in Finland and continue to
enjoy elsewhere in the European Union. If the proposal
passes as written, post will consult with local U.S. industry
and Washington to determine if a Special 301 listing is
appropriate in the 2009 cycle. End Summary.

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Background
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2. Product patents have been granted in Finland only since

1995. As such, nearly all products on the Finnish market are
still protected only by analoguous process patents. Prior to
2006, when Finland enacted the fix it is now proposing to
withdraw, the level of protection for innovative medicines in
Finland was among the lowest in the EU. At that time,
industry faced three major hurdles that taken together formed
a perfect storm: weak patent protection, liberal market
authorization and mandatory generic substitution.

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Finland Does the Right Thing But Then Changes Course
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3. After much Industry and Embassy lobbying, in 2006, the
Finnish government established criteria in Section 57(c) of
its Medicines Act that excluded pharmaceutical products from
generic reimbursement if they were protected by an analogus
process patent in Finland and enjoyed valid patent protection
in at least five other countries in the European Union.
57(c) was the result of long negotiations and was seen by
industry as a fair and equitable solution. Indeed, it was
used as an example for other countries, notably Norway, of
the ideal legislative remedy. Trouble started in the summer
of 2007 when the Finnish Pharmaceutical Pricing Board (PPB)
began cancelling the reimbursement status of some innovative
drugs, claiming the PPB was bound only by the Health
Insurance Act, not the the Medicines Act that contained the
exclusion criteria. At first, Industry and Econoff believed
this was an isolated action by an overzealous PPB chief,
especially because when we raised it with the newly-installed
Health Minister, she freely admitted she did not know what we
were talking about. Clearly she eventually got up to speed,
because before long her ministry was overtly supporting the
complete withdrawal of the 57(c) arrangement instead of
supporting similar exclusion criteria for the Health
Insurance Act as industry was proposing.

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USG and Industry Efforts
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4. Beginning late last year, Econoff and Commercial Officer
began working closely with the U.S. pharmaceutical company
representatives here in Finland as well as with the local
trade association Pharma Industry Finland (PIF) and its
director, former Finance Minister Suvi-Anne Siimes to devise
a strategy to head off the cancellation of 57(c). Since
January 2008 the Embassy has raised this at the highest level
of Finnish government, including with the Prime Minister but
also with virtually every other minister in the entire
government. Our strategy, carefully coordinated with
industry and Washington, has focused on underscoring that
Finland's knowledge-based economy has attracted much r&d
investment, including health-related project funds from the
USG. A small IPR deficiency would undermine Finland's
deserved reputation for innovation, a blow that was surely
not worth the short-term gains from savings. Industry
reinforced this message during the visit of Alex Azar, Eli
Lilly's Senior VP for Corporate Affairs (and a former Deputy
Secretary of HHS) and through intensive lobbying by PIF and
Siimes. Siimes has also reached out to the German, French

and Swiss Embassies whose companies also stand to suffer
under the new arrangement. USTR Ambassador Schwab and
Secretary Gutierrez have written their Finnish counterparts
on this issue and it has been raised with the Finnish Embassy
in Washington and during the visits of high-level Finnish
government officials.

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Next Steps
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5. With the cabinet's approval of the reference pricing
scheme and the subsequent removal of the protection
innovative products enjoyed under Section 57(c),there are
few steps left. Nonetheless, Embassy has a small window
until the end of the summer when parliament will reconvene
and consider the proposal. Given that the MPs' party
representatives in the cabinet have already approved the
proposal, however, chances for success are slim. However, we
remain committed to raising this with parliamentary leaders
in an attempt to encourage the development of a revised
proposal. If that fails, we will examine whether this
unfortunate set of events merits Finland's inclusion on the
Special 301 list.

BUTLER